How Qatar Is Being Pushed Into The Arms Of Iran By Saudi Arabia And Its Allies

Slowly but surely, Qatar is moving closer into an alliance of sorts with Iran.

Hampered by a trade and transport boycott from former allies Bahrain, the UAE and Saudi Arabia which is almost in its sixth month, the small but extremely rich state of Qatar is being forced to find its friends where it can. Nearby Oman has proved to be one willing ally through these difficult months, as has Turkey. The most politically disruptive linkages, however, are being formed across the waters of the Gulf with the Islamic Republic.

Iran and Qatar have always had a strong incentive to get along reasonably well as they share a huge natural gas field, known as the North Field in Qatar and as South Pars in Iran. It was this fairly cordial relationship between the two countries that has been cited by the three other Gulf countries (along with Egypt) as a reason for imposing their boycott in June.

The trade embargo may have been an attempt to convince Doha to downgrade its ties with Tehran, but it has in fact had the opposite effect. In August, Doha restored full diplomatic links with Tehran, some 20 months after it had recalled its ambassador in the wake of a mob ransacking the Saudi embassy in Tehran. At the time its alliance with Saudi Arabia was among Qatar’s most vital in the region; now the opposite is the case.

A young boy poses for a photo after writing a comment on a wall bearing a portrait of Qatar's Emir Sheikh Tamim bin Hamad Al Thani, in Doha, on July 6, 2017. (Photo: KARIM JAAFAR/AFP/Getty Images)

It is a sensitive issue for the U.S. as well. Some 6,671 U.S. troops are currently stationed in Qatar and the country hosts the Al-Udeid Airbase, which is the regional headquarters of U.S. Central Command.

The latest sign of the blossoming friendship between Doha and Tehran came on November 26, when Qatar’s Economy Minister Sheikh Ahmed bin Jassim Al-Thani travelled to the Iranian capital for talks with government ministers on business links between the two countries, including Minister of Industry, Mine and Trade Mohammad Shariatmadari and Foreign Minister Mohammad Javad Zarif.

Following the talks, Shariatmadari said trade between the two countries was currently worth around $1bn a year, but noted that Qatar wanted to boost this five-fold to $5bn a year. It is not clear just how that might be achieved, but economic activity has grown sharply this year and there is certainly more potential.

Data from the Iran Customs Administration show that Iran exported $139m worth of non-oil goods to Qatar in the seven months to October 22 – a timeframe which covers both pre- and post-boycott periods. That was a 117.5% increase on the same period a year earlier. According to the Iranian business daily the Financial Tribune, the most important products traded were bitumen, food and agricultural goods. There are signs that the growth in trade is accelerating, with $50m of the $139m total coming in the Iranian month ending October 22, up five-fold from the same time last year.

As well as exporting its own produce to Qatar, Iran is also now acting as a critical trade route for goods originating in other countries such as Turkey and Azerbaijan. In order to enhance that process, Qatar, Turkey and Iran signed a three-way trade agreement in Tehran on Sunday aimed at making it easier for goods to move between the three countries.

There are a number of other areas in which economic ties between Qatar and Iran are increasing and could be developed further.

Qatar used to import most of its construction equipment from Saudi Arabia, across the only land border that Doha has. However, with that supply route now cut off it has been forced to look elsewhere. A giant new port opened in Qatar in September which makes that process simpler. Iranian shipping lines have been calling in and Iranian construction firms are hoping there will be demand for their raw materials and expertise for things like the FIFA World Cup, which Qatar is hosting in 2022.

There has also been a gain for Iran from the rerouting of Qatar Airways flights, which are no longer able to fly through the airspace of Bahrain, Saudi Arabia or the UAE. That means they have to take longer paths to get to the Americas and parts of Europe and Africa and Iran has been happy to offer its airspace to enable that, gaining substantial overflight fees in the process.

There is also the potential for growth in investment flows in both directions which, until now, has not been particularly substantial. From Iran’s point of view, if it can attract Qatari investment it will help to bolster its economy which has struggled to fulfil the potential provided by the 2015 JCPOA nuclear deal.

One other intriguing idea that has been recently floated is the possible dual-listing of Iranian government debt, such as Islamic treasury bills (ITBs), on the Qatar Stock Exchange (QSE). Neda Bashiri, product development manager of Iran Fara Bourse, the country’s junior stock market, recently travelled to Qatar for talks with officials and while there told Qatari newspaper Gulf Times that “We have some offer for the QSE. The dual listing of Iran’s ITBs is an area,” she said “We are in a very early stage of talks. If we get positive response from Qatar, we are ready to initiate negotiations at the highest levels.”

An Iranian woman walks past a Qatar Airways branch in the capital Tehran on June 6, 2017. A ban on Qatari flights passing over Bahrain, Saudi Arabia and the UAE since June has forced the airline to route many of its planes via Iranian airspace (Photo: ATTA KENARE/AFP/Getty Images)

Dominic Dudley is a freelance journalist with almost two decades' experience in reporting on business, economic and political stories in the Middle East, Africa, Asia and Europe.

I am a journalist, analyst and photographer and have been covering business and economics stories in the Middle East and other emerging markets for the past decade. I am Editor of Gulf States News and a former Deputy Editor of the Middle East Economic Digest (MEED). I’ve wri...